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[email protected] Oz: North to China M ore than 700,000 Chinese visited Australia last year, the largest inbound market after New Zealand. China passed the UK three or so years back to claim the No. 2 spot on the strength of 10 consecutive years of growth averaging 13% a year. Last year’s total exceeded that at +14.5%. Proportionately, the dollars are even more impactful. Tourism Australia, the federal agency that vigorously markets the country in mainland China and Hong Kong, puts the Chinese at 11% of total visitors but their spending at more like 18%, which is more than the rest of the inbound market combined. In calendar 2013 it amounted to A$4.8 billion. Tourism Australia believes it has the potential to hit $9 billion by 2020, when forecasts are that China will be sending 200 million travelers into the world. As this amazing growth story unfolds, you have to think it augurs well for Down Under. Yet, Australia’s part in it has been shrinking. More and more Chinese are venturing overseas, and Australia’s desirability for them as a destination isn’t keeping pace. From 2001 to 2012 the country’s percentage share of China outbound tourism fell by almost half. Tourism Australia expects China will account for more than 40% of the country’s projected growth in international travel by 2020. Their numbers will surpass 1 million. Significant as this is, it reflects an average annual growth rate that will have declined by about 60% from 2002-2012, a period that saw Australia slip from the world’s No. 3 destination for luxury travelers to No. 7, according to the Hurun Report , the Shanghai-based bible of China wealth-watchers. Last year, Hong Kong-based China Reality Research, an arm of investment bank CLSA, surveyed some 500 Chinese travelers who’d been abroad in the previous three years and planned to go abroad in the next three. So people with above-average disposable incomes, we may assume, and Australia was 17th on the list of places they’d visited. (Hong Kong and Macau were nos. 1 and 2, respectively, Thailand was third, South Korea fourth, Taiwan fifth, Singapore, Japan, the US, Vietnam and Malaysia completed the top 10.) It was 12th on their list for future travel. Pointedly, when asked which destination they’d most want to visit “if money is no object,” only 16 chose Australia. The problem, many observers say, is product. That’s certainly the view of the government of Queensland, which is bidding out three new casino licenses to underpin billions in prospective destination-scale investment the state hopes will materialize to revive an ailing economy. But as this month’s IN FOCUS makes clear (“Queensland’s Big Gamble,” beginning on Page 26), there are some knowledgeable people who question whether the state can support three resort casinos. If The Star’s recent performance down in Sydney is any indication, they may be right. Echo Entertainment spent A$870 to remodel and expand New South Wales’ monopoly casino, a project that was completed in January 2013, and VIP volume in the half-year that ended 31st December was down 12.5% year on year. In winning the state’s approval last year for a competing casino, James Packer was able to sell the powers that be on the idea that Echo is bungling “the opportunities provided by the growth in Chinese tourism, the massive Asian high-roller market and Sydney’s natural attraction as a superior destination for high-end tourists and VIP players”. The fact that The Star’s expansion brought to Sydney the only five-star hotel it has seen since the 2000 Summer Olympics didn’t factor into his assessment, which also raises some questions about Crown Resorts’ own results. VIP turnover in the latest half-year was down in Melbourne and Perth a combined 25%. Then again, Australia as a whole accounts for only about 3% of Asian high-end gaming revenue, so there is something to be said for the thinking in Queensland—where Crown and Echo have squared off for the license allotted the capital of Brisbane—and to Crown’s grand plans for Crown Sydney, the A$1.5 billion 350-room luxury casino it will open in 2019 on the last meaningfully developable acreage on Darling Harbour. One thing about Mr Packer, his feel for where his home market is headed has been right on. Sydney is in the midst of a boom in new hotel construction that will grow room supply by 20% by the end of the decade, driven by robust increases in overseas arrivals (with travelers from China representing the biggest contingent, their numbers up 13% year on year) and domestic visitation, which is growing at rates not seen since before the Olympics. Corporate travel is up 27% through June. Occupancy rates are the highest in the region after Hong Kong and Tokyo. As a spokesman for commercial property giant CBRE noted recently, “There is a definite sense now that the timing is right for development.”